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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER
0-22582
TBA ENTERTAINMENT CORPORATION
(Exact Name of Registrant as specified in its Charter)
DELAWARE 62-1535897
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
16501 VENTURA BOULEVARD
ENCINO, CALIFORNIA 91436
(Address of principal executive offices) (Zip Code)
(818) 728-2600
(Registrant's telephone number, including area code)
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days: Yes [X] No [ ]
As of May 5, 2000, the Registrant had outstanding 8,207,800 shares of Common
Stock, par value $.001 per share.
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
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PART I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets................................ 3
Consolidated Statements of Operations...................... 4
Consolidated Statements of Cash Flows...................... 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 12
Signatures............................................................. 16
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
ASSETS
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Current assets:
Cash and cash equivalents .......................................................... $ 11,382,800 $ 12,847,600
Accounts receivable, net of allowance for doubtful
accounts of $87,900 and $50,000, respectively .................................. 4,024,600 3,593,400
Inventories ........................................................................ 640,500 563,300
Deferred charges and other current assets .......................................... 3,259,100 2,479,500
------------ ------------
Total current assets ..................................................... 19,307,000 19,483,800
Property and equipment, net ........................................................... 3,142,000 2,937,500
Other assets, net:
Goodwill ........................................................................... 25,812,800 19,383,700
Investments in Joint Venture ....................................................... -- 588,700
Other .............................................................................. 731,900 755,800
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Total assets ............................................................ $ 48,993,700 $ 43,149,500
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ........................................... $ 4,687,900 $ 3,765,500
Deferred revenue ................................................................... 6,629,700 4,497,600
Notes payable and current portion of long-term debt ................................ 2,784,700 3,328,000
------------ ------------
Total current liabilities ................................................ 14,102,300 11,591,100
Long-term debt, net of current portion ................................................ 6,395,200 3,719,600
------------ ------------
Total liabilities ........................................................ 20,497,500 15,310,700
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value;
authorized 1,000,000 shares, 2,600 of
Series A convertible preferred stock
issued and outstanding,
liquidation preference $100 ....................................................... 100 100
Common stock, $.001 par value; authorized 20,000,000
shares, 8,856,600 and 8,714,300 shares issued,
respectively ...................................................................... 8,900 8,700
Additional paid in capital .......................................................... 30,609,700 29,859,900
Retained earnings ................................................................... 176,100 32,200
Less treasury stock, at cost, 552,100 and 495,500
shares, respectively .............................................................. (2,298,600) (2,062,100)
------------ ------------
Total stockholders' equity ............................................... 28,496,200 27,838,800
------------ ------------
Total liabilities and stockholders' equity ............................... $ 48,993,700 $ 43,149,500
============ ============
</TABLE>
See notes to financial statements.
3
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE MONTHS ENDED
MARCH 31, PROFORMA THREE
------------------------------- MONTHS ENDED
2000 1999 MARCH 31, 1999
----------- ------------ ---------------
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Revenues .................................................. $20,302,000 $ 11,244,800 $ 12,931,700
Costs related to revenue .................................. 13,951,100 7,432,500 8,303,600
----------- ------------ ------------
Gross profit margin .............................. 6,350,900 3,812,300 4,628,100
Selling, general and administrative expense ............... 5,372,400 2,889,400 3,792,900
Depreciation and amortization expense ..................... 654,600 374,100 554,500
Equity in loss of Joint Venture ........................... -- 156,900 156,900
Interest expense (income), net ............................ 53,000 (146,400) (41,800)
----------- ------------ ------------
Income from continuing operations
before income taxes ..................................... 270,900 538,300 165,600
Provision for income taxes ................................ 127,000 210,000 64,600
----------- ------------ ------------
Income from continuing operations ......................... 143,900 328,300 101,000
----------- ------------ ------------
Discontinued operations:
Gain on disposition of discontinued
operations, net of income tax provision of
$399,600 for the three months ended
March 31, 1999 ...................................... -- 479,200 479,200
----------- ------------ ------------
Net income ................................................ $ 143,900 $ 807,500 $ 580,200
=========== ============ ============
Earnings per common share -- basic:
Income from continuing operations ................... $ 0.02 $ 0.04 $ 0.01
Income from discontinued operations ................. -- 0.06 0.06
----------- ------------ ------------
Net income ................................................ $ 0.02 $ 0.10 $ 0.07
=========== ============ ============
Earnings per common share -- diluted:
Income from continuing operations ................... $ 0.02 $ 0.04 $ 0.01
Income from discontinued operations ................. -- 0.06 0.06
----------- ------------ ------------
Net income ................................................ $ 0.02 $ 0.10 $ 0.07
=========== ============ ============
</TABLE>
See notes to financial statements.
4
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
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Cash flows from operating activities:
Net income ................................................... $ 143,900 $ 807,500
------------ ------------
Adjustments to reconcile net income to net cash provided
by continuing operations:
Income from discontinued operations ...................... -- (479,200)
Depreciation and amortization ............................ 654,600 374,100
Equity in loss of Joint Venture .......................... -- 156,900
Changes in assets and liabilities:
Decrease in accounts receivable ..................... 4,600 235,000
(Increase) in inventories ........................... (77,300) --
(Increase) decrease in deferred charges and other
current assets ................................... (506,100) 138,400
Decrease (increase) in other assets ................. 39,600 (42,400)
Increase (decrease) in accounts payable and
accrued liabilities .............................. 727,000 (292,200)
Increase in advance deposits and deferred revenue ... 2,132,100 37,600
------------ ------------
Total adjustments ............................ 2,974,500 128,200
------------ ------------
Net cash provided by continuing operations ... 3,118,400 935,700
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Cash flows from investing activities:
Proceeds from dispositions of businesses ..................... -- 381,000
Acquisition of business, net of cash acquired ................ (3,476,900) (2,435,800)
Expenditures for property and equipment ...................... (273,800) (187,400)
------------ ------------
Net cash used in investing activities ........ (3,750,700) (2,242,200)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings ................................... -- 73,000
Net borrowings on credit lines ............................. 365,000 --
Purchase of treasury stock ................................. (236,500) (1,850,700)
Repayments of borrowing .................................... (961,000) (203,200)
------------ ------------
Net cash used in financing activities ........ (832,500) (1,980,900)
------------ ------------
Net decrease in cash and cash equivalents ........................ (1,464,800) (3,287,400)
Cash and cash equivalents - beginning of period .................. 12,847,600 15,583,800
------------ ------------
Cash and cash equivalents - end of period ........................ $ 11,382,800 $ 12,296,400
============ ============
</TABLE>
See notes to financial statements.
5
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TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND BASIS OF PRESENTATION:
TBA Entertainment Corporation and subsidiaries (the "Company") is a
diversified communications and entertainment company that produces a broad
range of business communications, meeting production and entertainment
services for corporate meetings, develops and produces integrated music
marketing programs, manages music industry artists and develops and executes
merchandising programs for entertainment and sporting events. The Company
was incorporated in Tennessee in June 1993 and reincorporated in Delaware in
September 1997.
The accompanying unaudited consolidated financial statements of the Company
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
for complete year-end financial statements. The accompanying consolidated
financial statements should be read in conjunction with the more detailed
financial statements and related footnotes included in the Company's Form
10-K for the year ended December 31, 1999.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of the
financial position of the Company as of March 31, 2000, and the results of
its operations and cash flows for the three-month periods ended March 31,
2000 and 1999, respectively, have been included. Operating results for the
three months ended March 31, 2000, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2000.
Proforma Financial Information
The Company acquired Karin Glass & Associates, Inc. and affiliated companies
on March 17, 1999 and Mike Atkins Management, Inc. on December 6, 1999.
Operating results of each of these acquisitions and the acquisition of Romeo
Entertainment Group, Inc. on January 3, 2000 (Note 4), are included in the
accompanying consolidated statements of operations from their respective
acquisition dates.
The unaudited pro forma consolidated statements of operations represents the
consolidated results for the three months ended March 31, 1999, as if these
acquisitions had occurred as of the beginning of 1999. The pro forma results
reflect certain adjustments, including amortization of the excess purchase
price over fair value of net assets acquired, interest expense on the
acquisition debt and adjustments to salaries and ownership distributions to
former owners. The pro forma results are not necessarily indicative of what
actually would have occurred had the acquisitions been completed as of the
beginning of 1999 nor are they necessarily indicative of future consolidated
results.
The unaudited pro forma calculations in the consolidated statements of
operations for basic and diluted earnings per common share assumes that the
following number of weighted average shares were outstanding:
Basic.............. 8,776,500
Diluted............ 8,820,200
2. NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings
per common share:
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THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
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(UNAUDITED)
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Basic earnings per common share:
Income from continuing operations .............. $ 143,900 $ 328,300
Weighted average common stock outstanding ...... 8,340,300 8,449,600
---------- ----------
Basic earnings per common share ................ $ 0.02 $ 0.04
========== ==========
Diluted earnings per common share:
Income from continuing operations .............. $ 143,900 $ 328,300
---------- ----------
Weighted average common stock outstanding ...... 8,340,300 8,449,600
Additional common stock resulting from
dilutive securities:
Preferred stock .............................. 2,600 4,500
Shares issuable for stock options and
warrants ................................. 41,000 39,100
---------- ----------
Common stock and dilutive securities
outstanding ............................... 8,383,900 8,493,200
---------- ----------
Diluted earnings per common share .............. $ 0.02 $ 0.04
========== ==========
</TABLE>
Options and warrants to purchase 1,961,500 and 2,774,900 shares of common
stock in 2000 and 1999, respectively, were not considered in calculating
diluted earnings per share as their inclusion would have been anti-dilutive.
3. INVESTMENT IN JOINT VENTURE
Through December 31, 1999, the Company owned a 50% interest in a joint
venture with Warner Custom Music Corp. The joint venture, Warner/TBA,
developed and coordinated live, sponsored music entertainment marketing
tours and programs and related projects, and generated revenues primarily
from third party corporate sponsorships. Warner/TBA recognized revenue by
amortizing the contract sponsorship funds over the life of the related
programs, which ranged from single day events to tours lasting several
months.
Effective December 31, 1999, the formal joint venture agreement with Warner
reached the end of its term. Pursuant to an agreement with Warner, the net
assets of Warner/TBA were distributed to TBA on January 1, 2000. TBA will
continue to execute entertainment marketing programs previously developed by
Warner/TBA and will pay Warner a net profits interest for certain of the
2000 programs.
Through December 31, 1999, the Company accounted for the investment using
the equity method of accounting. Summary unaudited statements of operations
data of Warner/TBA for the three months ended March 31, 1999 are as follows:
Revenues.............. $ 71,200
Net loss.............. (313,800)
The following summary balance sheet data of Warner/TBA reflects the assets
and liabilities distributed to the Company on January 1, 2000.
Current assets......... $ 650,700
Non-current assets..... 155,900
Current liabilities.... 242,200
4. 2000 ACQUISITION
On January 3, 2000, the Company acquired 100% of the common stock of Romeo
Entertainment Group, Inc. ("Romeo") for a maximum purchase price of
$6,750,000. The purchase price paid at closing included a cash payment of
$3,475,000, the issuance of 142,300 shares of common stock of the Company
valued at $750,000 and the issuance of two promissory notes totaling
$2,525,000. The principal amount of the promissory note for $2,025,000 is
subject to reduction based on the earnings of Romeo
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during each of the years 2000 through 2004. The promissory notes accrue
interest at 8% and are payable in four equal annual installments of
principal plus accrued interest, commencing April 30, 2001.
5. SUBSEQUENT EVENTS
On April 5, 2000, the Company acquired 100% of the common stock of EJD
Concert Services, Inc. ("EJD"), for a purchase price of $600,000. EJD is the
leading producer of entertainment for outdoor fairs and festivals on the
West Coast and produces more than 200 programs annually for more than 60
state and regional fairs and multi-day special events across the U.S.
8
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of the following discussion and analysis is to explain the major
factors and variances between periods of the Company's financial condition and
results of operations. The following discussion of the Company's financial
condition and results of operations should be read in conjunction with the
historical consolidated financial statements and notes thereto included in the
Company's 1999 Form 10-K.
Introduction
The Company is a diversified communications and entertainment services company
that produces a broad range of business communications, meeting production and
entertainment services for corporate meetings, develops and produces integrated
music marketing programs and special events, manages music industry artists and
develops and executes merchandising programs for entertainment and sporting
events.
In April 1997, the Company acquired its first corporate communications and
entertainment company, TBA Entertainment Group Nashville, Inc., formerly Avalon
Entertainment Group, Inc. ("AEG"), including a 50% interest in the Warner/TBA
(formerly Warner/Avalon) joint venture. In 1998 and 1999, the Company grew its
operations through the acquisition of several additional corporate
communications and entertainment services, artist management and merchandising
businesses, including Titley Spalding & Associates, LLC ("TSA"), TBA
Entertainment Group Chicago, Inc., formerly Corporate Productions, Inc. ("CPI"),
Corporate Incentives, Inc. ("CII"), TBA Entertainment Group Phoenix, Inc.,
formerly Image Entertainment Productions, Inc. ("Image"), TBA Entertainment
Group Dallas, Inc., formerly Magnum Communications, Inc. ("Magnum"), TKS
Marketing, Inc. ("TKS") (collectively, the "1998 Acquisitions"); Karin Glass &
Associates, Inc. and affiliated companies (collectively, "KGA") and Mike Atkins
Management, Inc. ("Atkins") (collectively, the "1999 Acquisitions"). In 2000,
the Company also completed the acquisition of Romeo Entertainment Group, Inc.
("Romeo") and EJD Concert Services, Inc. ("EJD").
General
The Company classifies it operations in four major business segments. The
Company currently derives a majority of its revenues (71% and 73% for the three
months ended March 31, 2000 and 1999, respectively) from the production of
business communications and entertainment events for corporate clients. The
Company works with its clients to develop creative programming to deliver
messages to the client's targeted audiences. The Company receives a fee for
providing these services, which may include developing creative content,
designing audio/visual presentations and arranging for live entertainment and
related production services, including lights and sound. Revenue is recognized
when the services are completed for each event. Costs of producing the events
are also deferred until the event occurs.
The remainder of the Company's revenues are generated from event merchandising
(18% and 19% of total revenues for the three months ended March 31, 2000 and
1999, respectively), artist management (4% and 5% of total revenues for the
three months ended March 31, 2000 and 1999, respectively) and entertainment
marketing (7% and 3% of total revenues for the three months ended March 31, 2000
and 1999, respectively). Event merchandising revenue is recognized when the
merchandise is shipped or sold to the customer. Cost of sales includes the
direct cost of acquiring or producing the merchandise. Artist management
revenue, which generally consists of commissions received from artists'
earnings, is recognized in the period in which the artist earns the revenue.
There are generally only minimal direct costs associated with generating artist
management revenue. Entertainment marketing revenues and cost of revenues are
recognized when the services are completed for each program or, for those
programs with multiple events, apportioned to each event and recognized as each
event occurs.
Through December 31, 1999, the Company also developed and produced entertainment
marketing programs and special events through Warner/TBA, a joint venture with
an affiliate of Time Warner. The Company accounted for these activities using
the equity method of accounting. Effective December 31, 1999, the formal joint
venture agreement reached the end of its term. Accordingly, beginning in January
2000, the Company has recognized all revenue and expenses associated with
entertainment marketing programs that were previously executed by the Warner/TBA
joint venture. TBA will pay Time Warner a net profits interest for certain of
the 2000 programs.
Results of Operations - Comparison of the three months ended March, 2000 and
1999
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Results of operations of the Romeo acquisition and each of the 1999 Acquisitions
are included from the corresponding acquisition dates.
Revenues increased $9,057,200, or 81%, to $20,302,000 in the 2000 quarter from
$11,244,800 in the 1999 quarter. Of the increase, $6,153,000 came from corporate
meeting and entertainment events. Although the number of corporate meeting and
entertainment events decreased to 115 in the 2000 quarter from 132 in the 1999
quarter, the average revenue per event increased to $125,200 in the 2000 period
from $62,400 in the 1999 period. The Company continues to aggressively pursue
larger corporate meeting and entertainment events with Fortune 1000 companies.
In the 2000 period, the Company produced 11 events with revenues in excess of
$250,000 compared to five such events in the 1999 period.
Event merchandising revenues increased $1,419,200 for the 2000 period over the
1999 period, due primarily to the addition of merchandising activities through
the acquisition of KGA in March 1999. Artist management revenues increased
$304,300 for the 2000 period over the 1999 period, resulting primarily from an
increase in the Company's artist roster. The remaining $1,180,700 increase in
revenues resulted primarily from the production of the 2000 NBA All Star Game.
This event did not occur in 1999.
Cost of revenues increased $6,518,600, or 88%, to $13,951,100 for the 2000
period from $7,432,500 for the 1999 period. Cost of revenues, as a percentage of
revenues, increased to 69% for the 2000 period from 66% for the 1999 period
primarily due to the production of the 2000 NBA Allstar Game in the 2000 period,
which had a lower gross margin and increased cost of sales on certain
merchandise sales.
Selling, general and administrative expenses increased $2,483,000, or 86%, to
$5,372,400 for the 2000 period from $2,889,400 for the 1999 period. The increase
results primarily from increased personnel and related operating expenses
associated with the increased corporate entertainment and meeting planning
business, as well as selling, general and administrative expenses associated
with the 1999 Acquisitions, the Romeo acquisition and the consolidation of
activities previously accounted for by the Warner/TBA joint venture. The
increase is further explained by increased personnel and related expenses
incurred to develop an administrative and accounting infrastructure to manage
the Company's growth during the past year.
Depreciation and amortization expense increased $280,500, or 75%, to $654,600
for the 2000 period from $374,100 for the 1999 period. The increase results
primarily from the amortization of goodwill associated with the 1999
Acquisitions and the Romeo acquisition.
For the 1999 period, the Company's 50% joint venture interest in Warner/TBA was
a loss of $156,900. Revenues and operating expenses for Warner/TBA in the 1999
period were $71,200 and $385,000, respectively. As discussed above, in the 2000
period, all programs previously produced by Warner/TBA are now included in the
consolidated results of operations of the Company.
For the 2000 period, net interest expense was $53,000 compared to net interest
income of $146,400 for the 1999 period. The change is attributable to less
interest income earned on decreasing cash balances resulting from cash used for
acquisitions, debt repayments and stock repurchases and by increased interest
expense associated with outstanding debt related to the 1999 Acquisitions and
the Romeo acquisition.
The provision for income taxes, as a percentage of income taxes from continuing
operations before income taxes, is 47% for the 2000 period compared to 39% for
the 1999 period, which reflect statutory tax rates adjusted for estimated
book/tax differences. The 2000 rate is higher due to the 1999 use of the last of
the Company's operating loss carryforwards available to offset taxable income
and to the increase of nondeductibile amortization of goodwill from certain of
the Company's acquisitions.
Net income from continuing operations decreased $184,400, to $143,900 for the
2000 quarter from $328,300 for the 1999 period due to the reasons described
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position, funding
acquisitions and working capital needs from cash reserves and out of operating
cash flow. At March 31, 2000, the Company had cash and cash equivalents of
$11,382,800 and working capital of $5,204,700 including $2,784,700 of short term
borrowings and the current portion of long-term debt. Cash provided by
continuing operations was $3,118,400 for the first quarter of 2000 compared to
cash provided by continuing operations of $935,700 for the first
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quarter of 1999. The fluctuation in cash provided by continuing operations
between the 2000 and 1999 periods primarily reflects the timing of deferred
revenue and prepaid expenses associated with programs occurring in following
periods.
Cash used in investing activities for the first quarter of 2000 was $3,750,700
resulting primarily from cash used for the Romeo acquisition and expenditures
for property and equipment. Cash used in investing activities for the first
quarter of 1999 was $2,242,200 and resulted primarily from cash used for the KGA
acquisition and expenditures for property and equipment offset by cash received
from sale of discontinued businesses.
Cash used in financing activities for the first quarter of 2000 was $832,500,
resulting primarily from the repayment of borrowings and the purchase of
treasury stock, offset in part by working capital borrowings on bank lines of
credit. Cash used in financing activities for the first quarter of 1999 was
$1,980,900, resulting primarily from the purchase of treasury stock and the
repayment of borrowings.
The Company has pursued an aggressive growth strategy since its formation in
1993. From the Company's inception through December 31, 1997, the Company
acquired and operated certain businesses that were sold in 1998. The Company
relied on external sources of funds, including public offerings of its common
stock and bank borrowings, to finance the acquisition of these businesses and to
fund the general operations of the Company. In 1998, the Company realized net
proceeds of $19,393,800 from the sale of discontinued operations, after
repayment of borrowings associated with these businesses and applicable
transaction costs. In 1999, the Company received the final $3,000,000 of net
proceeds from the sale of discontinued operations.
The Company used a portion of the proceeds from the sale of these operations to
fund part of the purchase of AEG in 1997, the 1998 acquisitions, the 1999
Acquisitions and the acquisitions of Romeo and EJD in 2000. The remainder of the
purchase prices of these acquisitions was funded through the issuance of common
stock of the Company and the issuance of acquisition notes payable. The
acquisition notes are payable in various installments of principal plus accrued
interest at 8% through April 2004.
The Company expects to continue its aggressive growth strategy in certain
sectors of the entertainment industry. The Company anticipates that future
business acquisitions made by the Company will be completed through a
combination of cash, notes payable issued to the sellers and the issuance of
common stock of the Company to the sellers.
Management believes that cash flow from operations and current cash reserves are
adequate to meet its current working capital requirements. In addition, to
provide any additional funds necessary for the continued pursuit of the
Company's growth strategies, the Company may issue additional equity and debt
securities and may incur, from time to time, additional short- and long-term
bank indebtedness. The availability and attractiveness of any outside sources of
financing will depend on a number of factors, some of which relate to the
financial condition and performance of the Company, and some of which will be
beyond the Company's control, such as prevailing interest rates and general
economic conditions. There can be no assurance that such additional financing
will be available or, if available, will be on terms acceptable to the Company.
To the extent that the Company is able to finance its growth through internal
and external sources of capital, the Company intends to continue to grow its
operations through additional acquisitions. There can be no assurance that the
Company will be able to acquire any additional businesses, that any businesses
that are acquired will be or will become profitable or that the Company will be
able to effectively integrate any such businesses into its existing operations.
Forward Looking Statements
The foregoing discussion may contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are intended to be covered by
the safe harbors created by such provisions. These statements include the plans
and objectives of management for future growth of the Company, including plans
and objectives related to the acquisition of certain businesses and the
consummation of future private and public issuances of the Company's equity and
debt securities. The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking statements included in this Form 10-Q
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives of the Company will be achieved.
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PART II
OTHER INFORMATION
TBA ENTERTAINMENT CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
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NUMBER DESCRIPTION OF DOCUMENT
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2.1(1) -- Merger Agreement between TBA Entertainment Corporation and Avalon Acquisition Corp., Inc. and
Avalon Entertainment Group, Inc.
2.2(2) -- Purchase Agreement between TBA Entertainment Corporation, Titley Spalding & Associates, LLC,
Clarence Spalding and Robert R. Titley dated June 18, 1998.
2.3(3) -- Purchase Agreement between TBA Entertainment Corporation and SFX Entertainment, Inc. and AWC
Acquisition Corp. dated May 13, 1998.
2.4(4) -- Stock Purchase Agreement between TBA Entertainment Corporation, Magnum Communications, Inc,
William R. Cox, Gary A. Larr, Charles A. Barry and Lon M. Hudman dated October 15, 1998.
2.5(5) -- Merger Agreement among TBA Entertainment Corporation, CPI Acquisition Corp., Inc., Richard S.
Smith, Richard W. Perry, Pamela J. Furmanek and Corporate Productions, Inc. dated August 11, 1998.
2.6(6) -- Stock Purchase Agreement among TBA Entertainment Corporation, Kenneth C. Koziol and Image
Entertainment Productions dated September 15, 1998.
2.7(7) Stock Purchase Agreement among TBA Entertainment Corporation, Karin Glass & Associates, Inc.,
Ink Up, Inc., KGA, Inc., Karin Glass and Kenneth Glass dated March 18, 1999.
3.1(8) -- Certificate of Incorporation of the Company.
3.2(9) -- Bylaws of the Company.
4.1(10) -- Specimen Common Stock Certificate.
4.2(11) -- Article IX of the Certificate of Incorporation of the Company (included in Exhibit 3.1).
4.3(12) -- Certificate of Designation of Series A Convertible Preferred Stock of the Company.
4.4(13) -- Specimen Warrant Certificate.
10.1(14) -- Purchase and Sale Agreement between TBA Entertainment Corporation and Vail Summit Resorts,
Inc. dated July 10, 1998.
10.2(15) -- Employment Agreement dated as of January 1, 1994 between the Company and Thomas Jackson Weaver
III.
10.3(16) -- Employment Agreement dated as of January 1, 1994 between the Company and Prab Nallamilli.
10.4(17) -- Stock Purchase Warrant dated February 24, 1994 between the Company and Yee, Desmond, Schroeder
& Allen, Inc.
10.5(18) -- Form of Indemnification Agreement between the Company and each of the directors and executive
officers.
10.6(19) -- TBA Entertainment Corporation 1995 Stock Option Plan.
10.7(20) -- Form of Stock Option Agreement for options granted under the 1995 Stock Option Plan.
10.8(21) -- TBA Entertainment Corporation 1997 Stock Option Plan.
10.9(22) -- Form of Stock Option Agreement for options granted under the 1997 Stock Option Plan.
10.10(23) -- Representative's Warrant Agreement dated April 23, 1996 between the Company and H.J. Meyers &
Co., Inc.
10.11(24) -- Warrant Agreement dated April 23, 1996 among the Company, H.J. Meyers & Co., Inc. and American
Stock Transfer & Trust Company.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C> <C>
10.12(25) -- Registration Rights Agreement between the Company, Robert E. Geddes, Greg M. Janese, Thomas
Miserendino, Brian K. Murphy and Marc W. Oswald.
10.13(26) -- Consulting Agreement between Avalon Entertainment Group, Inc. and Robert E. Geddes.
10.14(27) -- Consulting Agreement between Avalon Entertainment Group Inc. and Thomas Miserendino.
10.15(28) -- Employment Agreement between Avalon Entertainment Group, Inc. and Marc W. Oswald.
10.16(29) -- Employment Agreement between Avalon Entertainment Group, Inc. and Greg M. Janese.
10.17(30) -- Placement Agent Warrant Agreement between the Company and Rauscher Pierce Refsnes, Inc.
10.18(31) -- Stock Purchase Agreement among TBA Entertainment Corporation, Robert Romeo and Romeo
Entertainment Group, Inc. dated November 26, 1999.
10.19(32) -- Stock Purchase Agreement among TBA Entertainment Corporation, Mike Atkins and Mike Atkins
Management, Inc. dated December 6, 1999.
10.20* -- Stock Purchase Agreement among TBA Entertainment Corporation, EJD Concert Services, Inc. and
the selling shareholders.
27* Financial Data Schedule.
</TABLE>
- ----------
* Filed herewith.
(1) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on April 21, 1997.
(2) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated on June 18, 1998.
(3) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated May 13, 1998.
(4) Incorporated herein by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated October 18, 1998.
(5) Incorporated herein by reference to Exhibit 2.5 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(6) Incorporated herein by reference to Exhibit 2.6 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(7) Incorporated herein by reference to Exhibit 2.7 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(8) Incorporated herein by reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(9) Incorporated herein by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(10) Incorporated herein by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(11) Incorporated herein by reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K dated April 21, 1997.
(12) Incorporated herein by reference to Exhibit 4.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-97890) dated
March 15, 1996.
13
<PAGE> 14
(13) Incorporated herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-QSB for the quarter ended (June 30, 1998).
(14) Incorporated herein by reference to Exhibit 10.2 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(15) Incorporated herein by reference to Exhibit 10.3 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(16) Incorporated herein by reference to Exhibit 10.5 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(17) Incorporated herein by reference to Exhibit 10.6 to the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944) dated
December 8, 1993.
(18) Incorporated herein by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(19) Incorporated herein by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(20) Incorporated herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(21) Incorporated herein by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(22) Incorporated herein by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(23) Incorporated herein by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
(24) Incorporated herein by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(25) Incorporated herein by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(26) Incorporated herein by reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(27) Incorporated herein by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(28) Incorporated herein by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 29,
1996.
(29) Incorporated herein by reference to Exhibit 10.20 to the Company's
Current Report on Form 8-K dated June 20, 1997.
(30) Incorporated herein by reference to Exhibit 10.20 to the Company's
Registration Statement on Form SB-2 (Registration No. 333-29775) dated
June 20, 1997.
(31) Incorporated herein by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31,
1999.
14
<PAGE> 15
(32) Incorporated herein by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended December 31,
1999.
(B) Form 8-K's filed during the quarterly period ended March 31, 2000:
None
15
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the city of Encino, California, on the
12th day of May, 2000.
TBA ENTERTAINMENT CORPORATION
By: /s/ Thomas Jackson Weaver III
---------------------------------------
Thomas Jackson Weaver III Chairman
of the Board, Chief Executive Officer
and President
By: /s/ Bryan J. Cusworth
---------------------------------------
Bryan J. Cusworth, Chief Financial
Officer
16
<PAGE> 1
EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
EDWARD JAMES DOUGHERTY,
JANET L. DOUGHERTY,
JOHN F. DOUGHERTY,
EVA DOUGHERTY,
THE ED AND JAN DOUGHERTY CHARITABLE REMAINDER TRUST
and
EJD CONCERT SERVICES, INC.
March 31, 2000
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1 - Purchase And Sale of Shares...........................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Purchase Price..................................................................................1
1.3 Closing.........................................................................................2
1.4 Further Action..................................................................................2
ARTICLE 2 - Representations And Warranties of TBA.................................................................3
2.1 Organization and Qualification..................................................................3
2.2 Authority Relative to this Agreement............................................................3
2.3 Certain Corporate Matters.......................................................................3
2.4 Broker's Fees...................................................................................4
2.5 Disclosure......................................................................................4
2.6 No Actions Pending..............................................................................4
2.7 Investment Intent...............................................................................4
2.8 Information.....................................................................................4
2.9 Sophistication of TBA...........................................................................4
2.10 Accredited Investor.............................................................................4
ARTICLE 3 - Representations And Warranties of
the Shareholders and Concert Services.............................................................................4
3.1 Organization, Qualification and Corporate Power.................................................5
3.2 Capitalization..................................................................................5
3.3 Authorization of Transaction....................................................................6
3.4 Subsidiaries....................................................................................6
3.5 Financial Statements............................................................................6
3.6 Events Subsequent to Financial Statements.......................................................7
3.7 Undisclosed Liabilities.........................................................................8
3.8 Tax Returns and Audits..........................................................................8
3.9 Books and Records..............................................................................10
3.10 Real Property..................................................................................10
3.11 Tangible Property..............................................................................10
3.12 Intellectual Property..........................................................................10
3.13 Contracts......................................................................................12
3.14 Suppliers and Customers........................................................................13
3.15 Notes; Accounts Receivable.....................................................................13
3.16 Powers of Attorney.............................................................................13
3.17 Condition of Property..........................................................................13
3.18 Insurance......................................................................................13
3.19 Litigation.....................................................................................13
3.20 Employees......................................................................................14
3.21 Employee Benefit Plans.........................................................................14
3.22 Guarantees.....................................................................................15
3.23 Legal Compliance...............................................................................15
3.24 Certain Business Relationships.................................................................15
3.25 Broker's Fees..................................................................................15
</TABLE>
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TABLE OF CONTENTS
(Continued)
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3.26 Environment, Health and Safety.................................................................15
3.27 Year 2000......................................................................................16
3.28 Disclosure.....................................................................................16
ARTICLE 4 - Additional Representations and Warranties of the Shareholders........................................16
4.1 Representations Regarding Shares of Concert Services...........................................16
4.2 Authorization..................................................................................17
ARTICLE 5 - Conduct of Business Pending The Closing..............................................................17
5.1 Conduct of Business by Concert Services Pending the Closing....................................17
5.2 No Other Bids for Concert Services.............................................................20
5.3 Lines of Business and Capital Expenditures.....................................................20
5.4 Accounting Methods.............................................................................20
5.5 Other Actions..................................................................................21
5.6 Working Capital................................................................................21
ARTICLE 6 - Additional Agreements................................................................................21
6.1 Expenses.......................................................................................21
6.2 Notification of Certain Matters................................................................21
6.3 Access to Information..........................................................................21
6.4 Taking of Necessary Action.....................................................................21
6.5 Notice of Changes..............................................................................22
6.6 Press Releases.................................................................................22
6.7 Employee Matters...............................................................................22
6.8 Tax Matters....................................................................................22
6.9 Referral Commissions...........................................................................23
6.10 Noncompetition Covenant........................................................................23
6.11 Covenant Not to Hire...........................................................................23
6.12 BandMerchandise.com............................................................................23
ARTICLE 7 - Conditions to Closing................................................................................23
7.1 Conditions to Obligations of Each Party to Effect the Closing..................................23
7.2 Additional Conditions to TBA's Obligations.....................................................24
7.3 Additional Conditions to the Obligations of Concert Services
and the Shareholders...........................................................................25
ARTICLE 8 - Termination, Amendment and Waiver....................................................................27
8.1 Termination....................................................................................27
8.2 Amendment......................................................................................27
8.3 Waiver.........................................................................................28
8.4 Effect of Termination..........................................................................28
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
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ARTICLE 9 - Indemnification......................................................................................28
9.1 By TBA, Concert Services and the Shareholders..................................................28
9.2 Claims for Indemnification.....................................................................28
9.3 Defense by Indemnifying Party..................................................................29
9.4 Payment of Indemnification Obligation..........................................................29
ARTICLE 10 - General Provisions..................................................................................29
10.1 Survival of Representations and Warranties.....................................................29
10.2 Effect of Due Diligence........................................................................30
10.3 Specific Performance...........................................................................30
10.4 Notices........................................................................................30
10.5 Interpretation.................................................................................32
10.6 Severability...................................................................................32
10.7 Miscellaneous..................................................................................32
10.8 Material Adverse Breach........................................................................33
10.9 Limitation of Liability........................................................................33
SCHEDULE 1.2 Purchase Price Consideration
SCHEDULE 2 Disclosure Schedule
ANNEX I Ownership of Shares
EXHIBIT A Form of Adjustable Promissory Note
EXHIBIT B Form of Employment Agreement
EXHIBIT C Form of Consulting Agreement
EXHIBIT D Form of Agent Services Agreement
</TABLE>
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of March 31, 2000 (this
"Agreement"), is by and among TBA Entertainment Corporation, a Delaware
corporation ("TBA"), Edward James Dougherty, Janet L. Dougherty, John F.
Dougherty, Eva Dougherty and The Ed and Jan Dougherty Charitable Remainder
Trust, all shareholders of Concert Services (as defined below) (individually, a
"Shareholder" and collectively, the "Shareholders"), and EJD Concert Services,
Inc., an Oregon corporation ("Concert Services").
RECITALS
WHEREAS, the Shareholders own all of the issued and outstanding common
stock (the "Shares") of Concert Services;
WHEREAS, TBA, Concert Services and the Shareholders each desire for TBA
to acquire (the "Acquisition") all of the Shares pursuant to the terms and
conditions of this Agreement, as a result of which Concert Services will become
a wholly owned subsidiary of TBA;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Shareholders agree to sell, assign, transfer and deliver to TBA
at the Closing (as hereinafter defined), and TBA agrees to purchase the from the
Shareholders at the Closing, the Shares, free and clear of any and all charges,
claims, community property interests, equitable interests, mortgages, liens,
security interests, pledges, charges, rights of assignment, rights of purchase,
rights of first offer or refusal, options, warrants or encumbrances of any
nature (collectively, "Liens").
1.2 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Shares shall be equal to Six Hundred Thousand Dollars ($600,000),
subject to possible adjustment as provided in the Adjustable Notes (hereinafter
defined) and subparagraph (c) below, and shall be paid or delivered to the
Shareholders as follows:
(a) At the Closing, TBA shall deliver to the Shareholders by
wire transfer to one or more accounts designated in writing by the
Shareholders to TBA prior to the Closing cash in an amount equal to
Five Hundred Forty Thousand Dollars ($540,000) (the "Cash Portion").
The Cash Portion shall be allocated among the Shareholders as specified
in Schedule 1.2.
<PAGE> 6
(b) At the Closing, TBA shall deliver to the Shareholders
promissory notes (the "Adjustable Notes") in the initial aggregate
principal amount of Sixty Thousand Dollars ($60,000), subject to
possible adjustment as set forth in the Adjustable Notes, each
Adjustable Note substantially in the form of Exhibit A attached hereto,
allocated among the Shareholders as specified in Schedule 1.2. Any
adjustment to the Purchase Price hereunder shall be accomplished only
through adjustment to payments under the Adjustable Notes as set forth
in the Adjustable Notes, and the Cash Portion of the Purchase Price
shall not be adjusted subsequent to Closing.
(c) On or before ninety (90) days after the Closing, TBA shall
pay to the Shareholders in cash, in the ratio in which the Cash Portion
was paid to the Shareholders, the dollar amount by which the Concert
Service's cash on deposit (not including advance deposits) on March 1,
2000, exceeded the sum of (i) $45,000, and (ii) unpaid liabilities and
expenses of Concert Services (net of collectible receivables) on such
date, as calculated under the accrual method of accounting.
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Winstead Sechrest &
Minick P.C., 1201 Elm Street, 5400 Renaissance Tower, Dallas, Texas, on March
31, 2000, or as soon as reasonably practicable thereafter as the conditions set
forth in Article 7 have been satisfied or waived (the "Closing Date"). At the
Closing:
(a) TBA will (i) pay to the Shareholders the Cash Portion by
wire transfer of immediately available funds, (ii) execute and deliver
to the Shareholders the Adjustable Notes, and (iii) execute and deliver
to the Shareholders such other documents and instruments required to be
executed and delivered by TBA under the terms of this Agreement; and
(b) The Shareholders will deliver to TBA (i) certificates
representing the Shares, duly endorsed, and (ii) such other documents
and instruments required to be delivered by the Shareholders under the
terms of this Agreement or reasonably requested by TBA.
1.4 Further Action. If, at any time after the Closing Date, any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest TBA with full right, title and possession and all rights, privileges and
immunities with respect to any or all of the Shares, the Shareholders shall take
all such action.
-2-
<PAGE> 7
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA
TBA hereby represents and warrants to Concert Services and the
Shareholders as follows:
2.1 Organization and Qualification. TBA has been duly incorporated and
is validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now conducted.
2.2 Authority Relative to this Agreement. TBA has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by TBA and the consummation by TBA of the transactions contemplated hereby have
been duly authorized by the Board of Directors of TBA, and no other corporate
proceedings on the part of TBA are necessary to authorize the execution and
delivery of this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by TBA and constitutes the valid
and binding obligation of TBA, enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally or by general
principles of equity. None of the execution and delivery of this Agreement by
TBA, the performance by TBA of its obligations hereunder or the consummation of
the transactions contemplated hereby by TBA will require any consent, approval
or notice under, or violate, breach, be in conflict with or constitute a default
(or an event that, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of, or result in the creation or
imposition of any lien upon any properties, assets or business of TBA under any
note, bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or commitment or
any order, judgment or decree to which TBA is a party or by which TBA or any of
its assets or properties is bound or encumbered, except those that have already
been given, obtained or filed. No authorization, consent or approval of, or
filing with, any public body, court or governmental or regulatory authority is
necessary on the part of TBA for the consummation by TBA of the transactions
contemplated by this Agreement.
2.3 Certain Corporate Matters. TBA is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which the
ownership of its properties, the employment of its personnel or the conduct of
its business requires it to be so qualified, other than in such jurisdictions
where the failure to so qualify would not, individually or in the aggregate,
have a materially adverse effect on TBA and its subsidiaries, taken as a whole.
TBA has full corporate power and authority and all authorizations, licenses and
permits necessary to carry on the business in which it engages or in which it
proposes presently to engage and to own and use the properties owned and used by
it. All material corporate actions taken by TBA since its date of incorporation
have been duly authorized and/or subsequently ratified, as necessary. TBA is not
in default under or in violation of any material provision of its charter or
bylaws.
-3-
<PAGE> 8
2.4 Broker's Fees. Neither TBA nor anyone on its behalf has any
liability to any broker, finder, investment banker or similar agent, or has
agreed to pay any brokerage fees, finder's fees or commissions, or to reimburse
any expenses of any broker, finder, investment banker or similar agent in
connection with the Acquisition or any similar transaction.
2.5 Disclosure. The representations and warranties and statements of
fact made by TBA in this Agreement and in certificates and other written
statements or agreements delivered or to be delivered pursuant to this Agreement
are accurate, correct and complete on the date of this Agreement and will,
except as contemplated hereby, be accurate, correct and complete at the Closing
and do not and will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make such representations and
warranties and statements and information contained herein or therein not
misleading.
2.6 No Actions Pending. There are no actions, claims, complaints,
grievances, suits, governmental inquiries, governmental investigations or
proceedings pending or, to the knowledge of TBA, threatened, and to the
knowledge of TBA, there are no investigations pending or threatened, which in
any manner challenge or seek to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement, by or before any court, arbitrator
or administrative or governmental body.
2.7 Investment Intent. TBA is acquiring the Shares for its own account
for the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). TBA will not sell or otherwise dispose of any
Shares in a manner which would require registration under the Securities Act or
any applicable blue sky law unless such registrations are effected.
2.8 Information. TBA has had an opportunity to ask questions of, and
receive answers from, the Shareholders concerning the Shares, and the
operations, financial condition and prospects of Concert Services.
2.9 Sophistication of TBA. TBA has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Shares.
2.10 Accredited Investor. TBA is an "accredited investor" as that term
is defined in regulations promulgated by the Securities and Exchange Commission.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AND CONCERT SERVICES
Except as set forth in the correspondingly numbered section of the
disclosure schedule attached hereto as Schedule 1 and incorporated herein by
this reference (the "Disclosure Schedule"),
-4-
<PAGE> 9
each Shareholder and Concert Services, jointly and severally, hereby represent
and warrant to TBA as follows:
3.1 Organization, Qualification and Corporate Power. Concert Services
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Concert Services is duly
qualified to do business as a foreign corporation and is in good standing in the
jurisdictions specified in Section 3.1 of the Disclosure Schedule, which are the
jurisdictions in which the ownership of its properties, the employment of its
personnel or the conduct of its business requires that it be so qualified or
where a failure to be so qualified or licensed would have a material adverse
effect on its financial condition, results of operation or business. Concert
Services has full corporate power and authority and all authorizations, licenses
and permits necessary to carry on the business in which it is engaged or in
which it proposes presently to engage and to own and use the properties owned
and used by it. Concert Services has delivered to TBA true, accurate and
complete copies of its charter and bylaws which reflect all amendments made
thereto at any time prior to the date of this Agreement. The minute books
containing the records of meetings of the shareholders and Board of Directors of
Concert Services, the stock certificate books and the stock record books of
Concert Services are complete and correct in all material respects. The stock
record books of Concert Services and the shareholder lists of Concert Services
which Concert Services has previously furnished to TBA are complete and correct
in all respects and accurately reflect the record and beneficial ownership of
all the outstanding shares of Concert Services' capital stock and all other
outstanding securities issued by Concert Services. All material corporate
actions taken by Concert Services since incorporation have been duly authorized
and/or subsequently ratified as necessary. Concert Services is not in default
under or in violation of any provision of its charter or bylaws. Concert
Services is not in default or in violation of any restriction, lien,
encumbrance, indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability by which it is bound or to which any of its assets is
subject.
3.2 Capitalization. Concert Services' entire authorized capital stock
consists of ten (10) shares of common stock, no par value per share ("Concert
Services Common Stock"), of which ten (10) shares are issued and outstanding and
ten (10) shares will be issued and outstanding immediately prior to the Closing
Date. All of the issued and outstanding shares of Concert Services Common Stock
have been and, as of the Closing Date, will be duly authorized and are and, as
of the Closing Date, will be validly issued, fully paid and nonassessable and
have not been and, as of the Closing Date, will not be issued in violation of
any pre-emptive rights. There are no outstanding or authorized options, rights,
warrants, calls, convertible securities, rights to subscribe, conversion rights
or other agreements or commitments to which Concert Services is a party or which
are binding upon Concert Services providing for the issuance or transfer by
Concert Services of additional shares of its capital stock and Concert Services
has not reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, contracts, arrangements or commitments based
upon the book value, income or other attribute of Concert Services. There are no
voting trusts or any other agreements or understandings with respect to the
voting of Concert Services' capital stock. Upon consummation of the Acquisition,
TBA will own the entire equity interest in Concert Services and Concert Services
will not have outstanding any stock or securities convertible or exchangeable
for any shares of its capital stock, nor have outstanding any rights, options,
agreements or
-5-
<PAGE> 10
arrangements to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock. The
Shareholders are the only holders of capital stock of Concert Services. All
capital stock, options, warrants and other securities issued by Concert Services
were issued in compliance, in all respects, with all applicable federal and
state securities laws.
3.3 Authorization of Transaction. Concert Services has the requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder. The execution, delivery and performance of this Agreement
and the transactions contemplated by this Agreement have been duly authorized by
the Board of Directors of Concert Services. No other corporate approval on the
part of Concert Services (other than shareholder approval) will be necessary to
authorize the execu tion, delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Concert Services and, upon approval hereof by the Shareholders of
Concert Services, will constitute the valid and binding obligation of Concert
Services, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
None of the execution and delivery of this Agreement by Concert Services, the
performance by Concert Services of its obligations hereunder or the consummation
of the transactions contemplated hereby by Concert Services will require any
consent, approval or notice under, or violate, breach, be in conflict with or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of, or result in
the creation or imposition of any lien upon any properties, assets or business
of Concert Services under any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which Concert
Services is a party or by which Concert Services or any of its assets or
properties is bound or encumbered, except those that have already been given,
obtained or filed, all as set forth in Section 3.3 of the Disclosure Schedule.
No notice to, filing with or authoriza tion, consent or approval of any public
body or authority is necessary for the consummation by Concert Services of the
transactions contemplated by this Agreement.
3.4 Subsidiaries. Concert Services does not own and is not obligated to
purchase any equity interest in or any other interest convertible into or
exchangeable for an equity interest in any entity.
3.5 Financial Statements. Concert Services has delivered to TBA (a)
unaudited balance sheets as of February 28, 1999, 1998 and 1997, (b) unaudited
statements of operations for each of the years in the three-year period ended
February 28, 1999, (c) unaudited balance sheets as of November 30, 1999, and (d)
unaudited statements of operations for the nine (9) months ended November, 1999,
for Concert Services (collectively, the "Financial Statements"). The Financial
Statements have been prepared on the cash basis of accounting, which basis of
accounting has been applied consistently for all periods and present fairly the
financial condition of Concert Services as of such dates and the results of its
operations and cash flows for such periods. Since February 29, 1996, there have
been no changes in Concert Services' method of accounting for tax purposes.
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3.6 Events Subsequent to Financial Statements. Except as disclosed in
the Financial Statements or permitted in this Agreement, since February 28,
1999, there has not been:
(a) any materially adverse change in the financial condition,
results of operations or business of Concert Services;
(b) any sale, lease, transfer, license or assignment of any
material assets, tangible or intangible, of Concert Services, other
than in the ordinary course of business;
(c) any damage, destruction or property loss, whether or not
covered by insurance, affecting materially adversely the properties or
business of Concert Services;
(d) any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of
Concert Services or any redemption, purchase or other acquisition of
any such shares;
(e) any mortgage or pledge of, or subjection to any material
lien, charge, security interest or encumbrance of any kind on, any of
the assets, tangible or intangible, of Concert Services (other than
liens arising by operation of law which secure obligations which are
not yet due and payable);
(f) any incurrence of indebtedness or liability or assumption
of obligations by Concert Services other than (i) those incurred in the
ordinary course of business, (ii) those which do not exceed $10,000 in
the aggregate, and (iii) those incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this
Agreement;
(g) any cancellation or compromise by Concert Services of any
material debt or claim, except for adjustments made in the ordinary
course of business which, in the aggregate, are not material;
(h) any waiver or release by Concert Services of any right of
any material value;
(i) (except for licenses of software made in the ordinary
course of business, consistently with past practice) any sale,
assignment, transfer or grant by Concert Services of any rights under
any concessions, leases, licenses, agreements, patents, inventions,
trademarks, trade names or copyrights or with respect to any know-how
or other intangible assets;
(j) any material arrangement, agreement or undertaking entered
into by Concert Services not terminable on 30 days or less notice
without cost or liability (including, without limitation, any payment
of or promise to pay any bonus or special compensation) with employees
or any increase in compensation or benefits to officers or directors of
Concert Services, other than in the ordinary course of business;
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(k) any change made or authorized in the charter or bylaws of
Concert Services;
(l) any issuance, sale or other disposition by Concert
Services of any shares of its capital stock or other equity securities,
or any grant of any options, warrants or other rights to purchase or
obtain (including upon conversion or exercise) shares of its capital
stock or other equity securities;
(m) any loan to or other transaction with any officer,
director or shareholder of Concert Services giving rise to any claim or
right of Concert Services against any such person or of such person
against Concert Services;
(n) any payment to or other transaction with any officer,
director or shareholder of Concert Services involving an amount in
excess of $5,000, individually or in the aggregate, other than the
payment of monthly compensation (or bonus compensation) consistent with
customary practice;
(o) any acceleration, termination, modification or
cancellation or threat thereof by any party of any contract, lease or
other agreement or instrument to which Concert Services is a party or
by which it is bound so as to affect, materially and adversely, the
properties or business of Concert Services; or
(p) any other material transaction or commitment entered into
other than in the ordinary course of business by Concert Services.
3.7 Undisclosed Liabilities. Concert Services has no material liability
or obligation whatsoever, known or unknown, either absolute, contingent or
otherwise, except to the extent shown on the Financial Statements, incurred in
the normal and ordinary course of business of Concert Services since March 1,
1999 (provided that, liabilities or obligations incurred in connection with the
termination of employees shall not be considered liabilities incurred in the
ordinary course of business), or incurred in the course of negotiating,
documenting and consummating the transactions contemplated by this Agreement.
Concert Services is not indebted, directly or indirectly, to any person who is
an officer, director or shareholder of Concert Services or any affiliate of any
such person in any amount whatsoever other than for salaries for services
rendered or reimbursable business expenses, and no such officer, director,
shareholder or affiliate is indebted to Concert Services, except for advances
made to employees of Concert Services in the ordinary course of business to meet
reimbursable business expenses anticipated to be incurred by such obligor.
3.8 Tax Returns and Audits. The taxable year of Concert Services ends
February 28. Concert Services has duly and timely filed or caused to be filed
all tax returns (the "Tax Returns") required to be filed on behalf of itself and
has paid in full or fully reserved against in the Financial Statements all
taxes, interest, penalties, assessments and deficiencies due or claimed to be
due on behalf of itself to foreign, federal, state or local taxing authorities
(including taxes on properties, income, franchises, licenses, sales, use and
payrolls). To the knowledge of each Shareholder and Concert Services, such Tax
Returns are correct in all material respects, and Concert Services is not
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required to pay any other taxes for such periods except as shown in such Tax
Returns. The income tax returns filed by Concert Services have not been, and are
not being, to the knowledge of each Shareholder, examined by the Internal
Revenue Service or other applicable taxing authorities for any period. All taxes
or estimates thereof that are due, or are claimed or asserted by any taxing
authority to be due, have been timely and appropriately paid so as to avoid
penalties for underpayment. Except for amounts not yet due and payable, all tax
liabilities to which the properties of Concert Services may be subject have been
paid and discharged. There are no tax liens (other than liens for taxes which
are not yet due and payable) on any of the property of Concert Services, nor are
there any pending or threatened examinations or tax claims asserted. Concert
Services has not granted any extensions of limitation periods applicable to tax
claims or filed a consent under Section 341(f) of the Code relating to
collapsible corporations. Except in jurisdictions in which Concert Services
voluntarily files tax returns, no claim has ever been made by a taxing authority
that Concert Services is or may be subject to taxation by that jurisdiction.
True and correct copies of all federal, foreign, state and local income and
other tax returns, notices from foreign, federal, state and local taxing
authorities, tax examination reports and statements of deficiencies assessed
against or agreed to by Concert Services since March 1, 1995, have been
delivered to TBA, and the same are listed in Section 3.8 of the Disclosure
Schedule. Concert Services is not a party to, or bound by, any tax indemnity,
tax sharing or tax allocation agreement. Concert Services is not a party to any
agreement that has resulted or would result in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code. Concert
Services has never been a member of an "affiliated group," as defined in Section
1504(a) of the Code. All positions taken on federal Tax Returns that could give
rise to a penalty for substantial understatement pursuant to Section 6662(d) of
the Code have been disclosed on such Tax Returns. Concert Services is not is a
United States real property holding corporation as defined in Section 897 of the
Code. No shareholder of Concert Services is a foreign person within the meaning
of Section 1445(b)(2) of the Code. Concert Services has not made any tax
elections under any section of the Code, including, without limitation under any
of Sections 108, 168, 338, 441, 463, 472, 1017, 1033 or 4977 of the Code (or any
predecessor thereof). None of the assets and properties of Concert Services is
an asset or property that TBA or any of its affiliates is or will be required to
treat as being (i) owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954 as amended, and in effect
immediately before the enactment of the Tax Reform Act of 1986, or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the Code. No
closing agreement pursuant to Section 7121 of the Code (or any predecessor
provision) or any similar provision of any state, local, or foreign law has been
entered into by or with respect to Concert Services or any assets thereof.
Concert Services has not agreed to or is not required to make any adjustment
pursuant to Section 481(a) of the Code (or any predecessor provision) by reason
of any change in any accounting method of Concert Services, Concert Services has
no applications pending with any taxing authority requesting permission for any
changes in any accounting method of Concert Services, and the I.R.S. has not
proposed any such adjustment or change in accounting method therefor. Concert
Services has not been or is not in violation (or with notice or lapse of time or
both, would be in violation) of any applicable law relating to the payment of
withholding of taxes. Concert Services has duly and timely withheld from
salaries, wages and other compensation and paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
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3.9 Books and Records. To the knowledge of each Shareholder and Concert
Services, the general ledgers and books of account of Concert Services, all
federal, state and local income, franchise, property and other tax returns filed
by Concert Services, with respect to its assets, and all other books and records
of Concert Services are in all material respects complete and correct and have
been maintained in accordance with good business practice and in accordance with
all applicable procedures required by laws and regulations in all material
respects.
3.10 Real Property. Concert Services owns no real property and has no
contractual or oral lease obligation with respect to any real property.
3.11 Tangible Property. Concert Services has good and marketable title
to, or a valid leasehold interest in, each item of tangible property, whether
real, personal or mixed, reflected on its books and records as owned or used by
it, subject to no material encumbrances, loans, security interests, mortgages or
pledges.
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a
list of intellectual property owned by Concert Services including all
patents, patent applications, trademarks, service marks, trade dress,
trade names, trade secrets, corporate names, customer lists,
copyrights, mask works, technology or intellectual property that are
material to the business of Concert Services and registrations or
applications to register any of the foregoing and a list of all
licenses or other contracts related thereto (collectively, the
"Intellectual Property"). With respect to each such item of
Intellectual Property:
(i) Concert Services is the sole and exclusive owner
and has the sole and exclusive right to use the item in the
conduct of its business;
(ii) no proceedings have been instituted, are pending
or are threatened which challenge the validity,
enforceability, use or ownership thereof;
(iii) the item (A) does not infringe upon or
otherwise violate the rights of others, (B) to the knowledge
of Concert Services is not being infringed upon by others and
(C) is not subject to any outstanding order, decree, judgment,
stipulation or charge;
(iv) no license, sublicense or agreement pertaining
to the item has been granted by Concert Services;
(v) Concert Services has not received any charge of
interference or infringement with respect to the item;
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(vi) except in the ordinary course of business,
Concert Services has not agreed to indemnify any person or
entity for or against any infringement with respect to the
item;
(vii) the transactions contemplated by this Agreement
will have no material adverse effect on the right, title and
interest of Concert Services in the item;
(viii) Concert Services has taken all steps which are
commercially reasonable to protect the rights set forth in
Section 3.12(a) of the Disclosure Schedule and will continue
to use commercially reasonable efforts to maintain those
rights prior to the Closing Date so as to not materially
adversely affect the validity or enforcement of such rights;
and
(ix) Concert Services has supplied TBA with true and
complete copies of all written documentation evidencing its
ownership of the item and of all licenses and other contracts
related thereto.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a
list describing all patents, trademarks, trade names, service marks,
copyrights, trade secrets and mask works of others which Concert
Services practices or uses that are material to Concert Services. With
respect to each such item of intellectual property:
(i) any license agreement covering the item is a
valid and binding agreement, has been validly executed and
delivered by Concert Services and, to the knowledge of Concert
Services, by the other parties thereto and is in full force
and effect;
(ii) no event has occurred which constitutes a breach
of such license agreement, Concert Services has not repudiated
and, to the knowledge of Concert Services, no other party
thereto has repudiated any provision thereof and there are no
disputes, oral arrangements or delayed payment programs in
effect as to any such license agreement;
(iii) Concert Services has supplied TBA with a true
and complete copy of the license agreement;
(iv) the transactions contemplated by this Agreement
will have no material adverse effect on the ability of Concert
Services to continue using or practicing each such item; and
(v) Concert Services is not aware of any claim that
the exercise of the rights granted to Concert Services with
respect to such item infringes upon the intellectual property
rights of any third party.
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(c) To the knowledge of each Shareholder and Concert Services,
Concert Services has not infringed, misappropriated or otherwise
violated any intellectual property rights of any third party. Concert
Services is not aware of any infringement, misappropriation or
violation with respect to intellectual property which will occur as a
result of the continued operation of the business of Concert Services
as now conducted or as presently proposed to be conducted.
(d) Concert Services has taken commercially reasonable
security measures to protect the security, confidentiality and value of
all the material intellectual property owned by it.
3.13 Contracts. Section 3.13 of the Disclosure Schedule lists the
following contracts and written arrangements, true and complete copies of which
have been delivered to TBA, to which Concert Services is a party:
(a) any contract for the lease of personal property from or to
third parties providing for lease payments in excess of $5,000.00 per
annum;
(b) any contract for the purchase or sale of supplies,
products manufactured by Concert Services or other personal property or
for the furnishing or receipt of services which contract calls for
performance over a period of more than one year or which involves more
than the sum of $5,000.00;
(c) any joint venture or partnership agreement;
(d) any agreement or instrument under which Concert Services
is or may become indebted for borrowed money;
(e) any noncompetition agreement;
(f) any other contract in which the consequences of a default
or termination would have a materially adverse effect on the financial
condition of Concert Services or on the prospects or the conduct of the
business of Concert Services;
(g) any standard form of license agreement; and
(h) any other contract or arrangement not entered into in the
ordinary course of business.
All contracts and arrangements listed in Section 3.13 of the Disclosure Schedule
are valid and binding agreements of Concert Services. Neither Concert Services
nor, to the knowledge of each Shareholder, any other party is in breach or
default, and no event has occurred on the part of Concert Services or, to the
knowledge of the each Shareholder, on the part of any other party to any such
contract or arrangement which with notice or lapse of time would constitute a
breach or default or
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permit termination under any such contract or arrangement. None of such
contracts or arrangements will be terminated or modified by the consummation of
the Acquisition. Concert Services has previously made available to TBA all of
the material service agreements of Concert Services with its customers. Concert
Services is not a party to any verbal contract or arrangement which, if reduced
to written form, would be required to be listed in Section 3.13 of the
Disclosure Schedule under the terms of subsections (a)-(h) of this Section 3.13.
3.14 Suppliers and Customers. Section 3.14 of the Disclosure Schedule
is a true and correct list of the ten (10) largest events (by dollar value of
contracts) under contract with Concert Services during the past twelve (12)
months and the ten (10) largest suppliers of talent (by dollar value of
contracts) utilized by Concert Services during the past twelve (12) months. No
representative of any such event or supplier of talent has notified Concert
Services that it will substantially decrease or cease doing business with
Concert Services.
3.15 Notes; Accounts Receivable. As of the Closing Date, all notes
payable to and accounts receivable of Concert Services will be properly
reflected on their respective books and records and will be valid receivables
subject to no setoffs or counterclaims.
3.16 Powers of Attorney. There are no outstanding material powers of
attorney or similar instruments executed by Concert Services.
3.17 Condition of Property. Each fixture, machine and piece of
equipment (having a net book value of $5,000.00 or more) owned or used by
Concert Services is in good operating condition and repair, subject to normal
wear and tear. Concert Services owns or leases under valid lease all machinery,
equipment and other tangible assets used in the conduct of its business as
presently conducted.
3.18 Insurance. Concert Services is insured under the policies listed
in Section 3.18 of the Disclosure Schedule (the "Insurance Policies"). The
Insurance Policies are in full force and effect. All premiums due on the
Insurance Policies or renewals thereof have been paid and there is no default by
Concert Services under any of the Insurance Policies.
3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth any
instances in which (a) Concert Services is subject to any judgment or order
(other than orders of general applicability) of any court or quasi-judicial or
administrative agency of any jurisdiction, domestic or foreign, or where there
is any charge, complaint, lawsuit or governmental investigation pending or
threatened against Concert Services; or (b) Concert Services is a plaintiff in
any action, domestic or foreign, judicial or administrative, or any such action
exists in which a counterclaim against Concert Services is pending or might be
brought. None of the actions, suits, proceedings or investigations set forth in
Section 3.19 of the Disclosure Schedule could result in any adverse change in
the condition, financial or otherwise, of Concert Services, the same being fully
reserved against in the Financial Statements. There are no unsatisfied
judgments, orders (other than orders of general applicability), decrees or
stipulations affecting Concert Services or to which Concert Services is a party
and there
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is no reason to believe that any such action, suit, proceeding or investigation
may be brought or threatened against Concert Services.
3.20 Employees. Concert Services has not entered into any written or
oral employment agreements with any employee. Concert Services is not a party to
or bound by any collective bargaining agreement. There are no loans or other
obligations payable or owing by Concert Services to any shareholder, officer,
director or employee of Concert Services (except salaries and wages incurred and
payable in the ordinary course of business), nor are there any loans or debts
payable or owing by any of such persons to Concert Services or any guarantees by
Concert Services of any loan or obligation of any nature to which any such
person is a party. Concert Services has complied in all material respects with
all laws and regulations which relate to the employment of labor, employee civil
rights or equal employment opportunities.
3.21 Employee Benefit Plans. Concert Services has listed in Section
3.21 of the Disclosure Schedule and has furnished to TBA true and complete
copies of (a) any nonqualified deferred or incentive compensation or retirement
plans or arrangements, (b) any qualified retirement plans or arrangements, (c)
any other employee compensation, severance or termination pay or welfare benefit
plans, programs or arrangements and (d) any related trusts, insurance contracts
or other funding arrangements maintained, established or contributed to by
Concert Services or to which Concert Services is a party or otherwise is bound
("Concert Services Employee Benefit Plans"). Except as required by law, Concert
Services does not maintain or contribute or has ever maintained or contributed
to any funded or unfunded medical, health or life insurance plan or arrangement
for retirees or terminated employees. With respect to the employee benefit plans
listed in Section 3.21 of the Disclosure Schedule, Concert Services has
furnished to TBA true and complete copies of (i) any summary plan description or
other employee communication materials, (ii) the latest financial statements and
annual reports, and (iii) all documents filed with the Internal Revenue Service
or the Department of Labor since December 31, 1994. All employee benefit plans
and related trusts listed in Section 3.21 of the Disclosure Schedule and
maintained or contributed to by Concert Services or with respect to which
Concert Services now has or has ever had any liability or potential liability
comply in form and in operation with all requirements of ERISA and the Code. All
required reports with respect to such plans required by applicable law have been
filed. No applications for rulings, determination letters, advisory opinions or
prohibited transaction exemptions are currently pending before the Internal
Revenue Service, the Department of Labor or the Pension Benefit Guaranty
Corporation with respect to any such employee benefit plans or arrangements or
any related trusts. None of such employee benefit plans or arrangements, any
related trusts, the trustees of any related trusts or the directors, officers
and employees of Concert Services is the subject of any lawsuit, arbitration or
other proceeding concerning any benefit claim or other benefit-related matter
(other than routine claims in the ordinary course of business), and there have
been no prohibited transactions as described in Section 406 of ERISA or as
defined in Section 4975 of the Code with respect to any such plan. Neither
Concert Services, its directors, officers and employees nor any other fiduciary,
as such term is defined in Section 3 of ERISA, has committed any breach of
fiduciary responsibility imposed by ERISA or any other applicable law which
would subject Concert Services or its directors, officers and employees to
liability under ERISA or any applicable law.
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3.22 Guarantees. Concert Services is not a guarantor or otherwise
liable for any material indebtedness of any other person, firm or corporation
other than endorsements for collection in the ordinary course of business.
3.23 Legal Compliance. To the knowledge of each Shareholder and Concert
Services, Concert Services and each of its respective directors, officers and
employees (the individuals only in their capacities as representatives of
Concert Services) has complied in all material respects with all applicable laws
and regulations of foreign, federal, state and local governments and all
agencies thereof, and no claim has been filed against Concert Services alleging
a violation of any such laws or regulations. Concert Services holds all of the
material permits, licenses, certificates or other authorizations of foreign,
federal, state or local governmental agencies required for the conduct of its
business as presently conducted or proposed to be conducted. Neither Concert
Services, nor any director, officer, agent, partner or employee thereof or any
other person associated with or acting for or on behalf of Concert Services has
directly or indirectly (a) made or agreed to make any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment (whether in cash or
otherwise) to any person, private or public, regardless of form, whether in
money, property, or services, in violation of any applicable law, rule or
regulation (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
Concert Services, or (iv) to pay for any lobbying or similar services or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of Concert Services.
3.24 Certain Business Relationships. To the knowledge of each
Shareholder, except for Entertainment Consultants, LLC, an Oregon limited
liability company recently formed by Edward James Dougherty and Janet L.
Dougherty, none of the present or former shareholders, directors, officers or
employees of Concert Services owns, directly or indirectly, any interest in any
business, corporation or other entity (other than investments in publicly held
companies) which, on the date hereof or within the past 12 months, has been
involved in any manner in any business arrangement or relationship with Concert
Services, and none of the foregoing persons owns any property or rights,
tangible or intangible, which are used in the business of Concert Services.
3.25 Broker's Fees. Neither Concert Services nor anyone on its behalf
has any liability to any broker, finder, investment banker or similar agent, or
has agreed to pay any brokerage fees, find er's fees or commissions, or to
reimburse any expenses of any broker, finder, investment banker or similar agent
in connection with the Acquisition or any similar transaction.
3.26 Environment, Health and Safety. Concert Services is in compliance
with all environmental, health and safety laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand or notice has been held
or commenced against Concert Services alleging any failure so to comply. Concert
Services has obtained and been in compliance with all of the material terms and
conditions of all permits, licenses and other authorizations which are required
under, and have complied with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, laws,
and timetables which are contained in, all applicable environmental, health and
safety laws.
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3.27 Year 2000. To the knowledge of each Shareholder and Concert
Services, except for the "current date" feature on one computer, the computer
programs and technical systems used by Concert Services are year 2000 compliant,
will function and operate prior to, during and after the calendar year 2000 in
accordance with their specifications and will provide the required output
without experiencing abnormal ending dates and/or invalid or incorrect years and
shall incorporate century recognition date data, calculations that use same
century and multi-century formulas and date values that reflect the current
century in all transactions. In addition, except as set forth in the preceding
sentence, all such computer programs and technical systems will process, manage
and manipulate data involving dates, including single century and multi-century
formulas, and will not cause an abnormally ending scenario within the
application or generate incorrect values or invalid results involving such
dates.
3.28 Disclosure. The representations and warranties and statements of
fact made by Concert Services in this Agreement, in the Disclosure Schedule, in
the responses to the Due Diligence Checklist delivered to the Shareholders by
letter dated December 9, 1999, and in certificates and other written statements
or agreements delivered or to be delivered pursuant to this Agreement are
accurate, correct and complete in all material respects on the date of this
Agreement and will, except as contemplated hereby, be accurate, correct and
complete in all material respects on the Closing Date and do not and will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained herein
or therein not misleading.
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the correspondingly numbered section of the
Disclosure Schedule, each Shareholder severally represents and warrants to TBA
as to himself or herself only and not with respect to any other Shareholder as
follows:
4.1 Representations Regarding Shares of Concert Services.
(a) Such Shareholder is the record and beneficial owner of and has good
title to the Shares set forth opposite his or her name on Annex I attached
hereto, free and clear of any and all Liens. Annex I attached hereto sets forth
the number of shares of capital stock of Concert Services owned by the
Shareholders, and the Shares collectively represent all the issued and
outstanding capital stock of Concert Services.
(b) Such Shareholder has the full right, power and authority to enter
into this Agreement.
(c) Such Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution or delivery
of this Agreement by such Shareholder.
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(d) No broker or finder has acted for such Shareholder in connection
with this agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of such Shareholder.
4.2 Authorization. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which such Shareholder is a party constitute the valid
and legally binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with their respective terms, except as enforceability
may be limited or affected by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws of general application relating to or affecting
creditors' rights generally.
The execution, delivery and performance by such Shareholder of this
Agreement and the agreements provided for herein, and the consummation by such
Shareholder of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to such Shareholder; (b)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of such Shareholder pursuant to, any indenture, mortgage,
deed of trust or other instrument or agreement to which such Shareholder is a
party or by which such Shareholder or any of his or her properties is or, to the
knowledge of such Shareholder, may be bound, except for violations or conflicts
which individually or in the aggregate would not have a material adverse effect
on Concert Services' financial condition or results of operation.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business by Concert Services Pending the Closing.
Concert Services covenants and agrees that, prior to the Closing Date, unless
TBA shall otherwise approve in writing (which approval will not be unreasonably
withheld) or as otherwise expressly contemplated or permitted by this Agreement:
(a) Concert Services shall conduct its business and
operations, including its cash management practices, the collection of
receivables, maintenance of facilities and payment of payables, only in
the usual and ordinary course of business and consistent with past
custom and practice in all material respects;
(b) Except as contemplated by this Agreement, Concert Services
shall not directly or indirectly do any of the following: (i) sell,
pledge, dispose of or encumber any material portion of its assets,
except in the ordinary course of business; (ii) amend or propose to
amend its charter or bylaws; (iii) split, combine or reclassify any
outstanding shares of its
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capital stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect
to shares of its capital stock; (iv) redeem, purchase or acquire or
offer to acquire any shares of its capital stock or other securities;
(v) create any subsidiaries; or (vi) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the matters
set forth in this Section 5.1(b);
(c) Concert Services shall not (i) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or any options, warrants, conversion privileges
or rights of any kind to acquire any shares of, its capital stock; (ii)
acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization
or division or material assets thereof; (iii) incur any material
indebtedness for borrowed money, issue any debt securities or guarantee
any indebtedness to others; or (iv) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(d) Concert Services shall not (i) enter into or modify any
employment, severance or similar agreements or arrangements with, or
grant any bonus, salary increase, severance or termination pay to, any
officers or directors; or (ii) in the case of employees who are not
officers or directors, take any action other than in the ordinary
course of business and consistent in all material respects with past
practice (none of which shall be unreasonable or unusual) with respect
to the grant of any bonuses, salary increases, severance or termination
pay or with respect to any increase of benefits payable in effect on
March 1, 1999;
(e) Concert Services shall not adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
employee;
(f) Except as otherwise required by its charter or bylaws, by
this Agreement or by applicable law, Concert Services shall not call
any meeting of its shareholders and, with respect to any meeting of its
shareholders called by Concert Services, shall provide to TBA copies of
all written materials and other information given to the shareholders
prior to the time such materials and information are given to the
shareholders;
(g) Concert Services shall use commercially reasonable efforts
to cause its current insurance (or reinsurance) policies not to be
canceled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse,
replacement policies underwritten by insurance and reinsurance
companies of nationally recognized standing providing coverage equal to
or greater than the coverage under the can celled, terminated or lapsed
policies for substantially similar premiums are in full force and
effect;
(h) Concert Services shall (i) use commercially reasonable
efforts to preserve intact its business organization and goodwill, keep
in full force and effect all material rights,
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licenses, permits and franchises relating to its business, keep
available the services of its officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with it; (ii) report
on a regular and frequent basis, at reasonable times, to
representatives of TBA regarding operational matters and the general
status of ongoing operations; (iii) use commercially reasonable efforts
not to take any action which would render, or which reasonably may be
expected to render, any representation or warranty made by it in this
Agreement untrue in any material respect at any time prior to the
Closing Date if then made; and (iv) notify TBA of any emergency or
other change in the normal course of their respective business or in
the operation of their properties and of any tax audits, tax claims,
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, audit, claim, complaint, investigation or hearing
would be material, individually or in the aggregate, to the financial
condition, results of operations or business of Concert Services, or to
the ability of Concert Services or TBA to consummate the transactions
contemplated by this Agreement;
(i) Concert Services shall deliver to TBA promptly (but in any
event within two business days) after the discovery or receipt of
notice of any default under any material agreement to which it is a
party or any other material adverse event or circumstance affecting
Concert Services (including the filing of any material litigation
against Concert Services or the existence of any dispute with any
person or entity which involves a reasonable likelihood of such
litigation being commenced), a certificate of the President of Concert
Services specifying the nature and period of the existence thereof and
what actions Concert Services has taken and proposes to take with
respect thereto;
(j) Concert Services shall use commercially reasonable efforts
to maintain its assets in customary repair, order and condition,
replace in accordance with past practice its inoperable, worn out or
obsolete assets with assets of quality at least comparable to the
original quality of the assets being replaced and maintain in all
material respects its books, accounts and records in accordance with
past custom and practice as used in the preparation of the Financial
Statements;
(k) Concert Services shall use commercially reasonable efforts
to maintain in full force and effect the existence of all material
patents, inventions, trademarks, service marks, trade dress, trade
names, corporate names, copyrights, mask works, trade secrets,
licenses, computer software, data and documentation and other
proprietary rights, which it uses or owns;
(l) Concert Services shall comply in all material respects
with all legal requirements and contractual obligations applicable to
its operations and business and pay all applicable taxes; and
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(m) Concert Services shall not enter into any contract (except
for artist performances providing for payments of $50,000 or less)
requiring payments in excess of $20,000 or for a duration of more than
one (1) year.
For purposes of this Section 5.1, should TBA fail to approve in writing
any action for which its approval is required pursuant to this Section 5.1
within three (3) business days after its receipt of a written request for
approval in accordance with the notice requirements contained herein, the matter
shall be deemed approved by TBA. Notwithstanding any other provision of this
Agreement, the amendment or modification of the Disclosure Schedule by Concert
Services after the time TBA has signed this Agreement shall have no effect with
respect to the agreements, covenants and obliga tions of Concert Services and
TBA pursuant to this Section 5.1 and Sections 7.2 and 7.3 of this Agreement.
5.2 No Other Bids for Concert Services. Concert Services shall not, nor
either authorize or knowingly permit any officer, director, shareholder or
employee of, or any investment banker, attorney, accountant or other
representative retained by, Concert Services to, make, solicit, initiate,
encourage or respond to a submission of a proposal or offer from any person or
entity (other than TBA) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, Concert Services
or other similar transaction or business combination involving Concert Services
(hereinafter collectively referred to as a "Third Party Offer"). Concert
Services will not participate in any negotiations regarding, or furnish to any
person or entity (other than TBA) any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any person or entity (other than TBA) to do or seek any
of the foregoing. Concert Services will immediately cease and cause to be
terminated any contacts or negotiations currently pending with respect to Third
Party Offers, if any, and shall use its best efforts to cause all reports,
material, data and other written information heretofore disseminated by it or on
its behalf by any such officer, director or employee or any investment banker,
attorney, accountant or other representative in connection with any such Third
Party Offer or any inquiry or proposal related thereto to be promptly returned
to it. Concert Services shall promptly notify TBA of the receipt of any Third
Party Offer or any inquiry or communication which might reasonably be expected
to lead to any Third Party Offer and will provide TBA with all information that
TBA may reasonably request with respect thereto.
5.3 Lines of Business and Capital Expenditures. Unless approved in
writing by TBA, Concert Services covenants that it will not (a) enter into any
new material line of business; (b) change its investment, liability management
and other material policies in any material respect; or (c) incur or commit to
any capital expenditures, obligations or liabilities in connection therewith.
5.4 Accounting Methods. Unless approved in writing by TBA, Concert
Services covenants that it will not change its methods of accounting in effect
at February 28, 1999, except as required by changes in generally accepted
accounting principles as concurred in by Concert Services' independent
accountants.
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5.5 Other Actions. Unless approved in writing by TBA, Concert Services
covenants that it shall not take any action that would or might reasonably be
expected to result in any of the representations and warranties of Concert
Services set forth in this Agreement becoming untrue in any material respect
after the date hereof or any of the conditions to the Closing set forth in
Article 7 of this Agreement not being satisfied.
5.6 Working Capital. As of March 1, 2000, Concert Services shall have
no less than $45,000 in cash (not including advance deposits) in excess of the
unpaid liabilities and expenses of Concert Services (net of collectible
receivables) on such date. Commencing March 1, 2000 and ending on the Closing
Date, Concert Services shall make no distributions with respect to its stock or
make any payments other than in the ordinary course of its historic trade or
business.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the other agreements
contemplated hereby and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses.
6.2 Notification of Certain Matters. Each party shall give prompt
notice to the others of (a) the occurrence or failure to occur of any event,
which occurrence or failure would result in any Material Adverse Breach (as
defined in Section 10.8 of this Agreement), and (b) any failure of such party,
or any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied hereunder.
6.3 Access to Information. From the date hereof to the Closing Date,
each of Concert Services and TBA shall, and shall cause its respective officers,
directors, employees and agents to, afford the officers, employees, agents and
representatives of the other parties hereto (including the Shareholders)
complete access at all reasonable times to such officers, employees and agents
and its properties, books and records (all such access to be arranged through
the respective officers of the parties hereto so as not to be unreasonably
disruptive to any of the parties), and shall furnish each of such parties all
financial, operating, personnel, compensation, tax and other data and
information as such parties, through their respective officers, employees,
agents or representatives, may request.
6.4 Taking of Necessary Action. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees, subject to applicable laws,
to use all reasonable efforts promptly to take or cause to be taken all action
and promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
Concert Services and TBA shall use their best efforts to maintain and make all
filings with and obtain all consents, approvals, and/or assurances from third
parties and appropriate governmental agencies and authorities necessary or, in
the opinion of Concert Services or TBA, advisable for the consummation
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of the transactions contemplated by this Agreement. Each party shall cooperate
with the other in good faith to help the other satisfy its obligations in this
Section 6.4.
6.5 Notice of Changes. Each of Concert Services and TBA shall each
promptly inform the other in writing if any change shall have occurred or shall
have been threatened (or any development shall have occurred or shall have been
threatened involving a prospective change) in its financial condition, results
of operations or business that is or may reasonably be expected to have a
material adverse effect on its financial condition, results of operations or
business.
6.6 Press Releases. Concert Services and TBA shall consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby; provided, however, that nothing in this Section 6.6 shall
be deemed to prohibit any party hereto from making any disclosure that is
required to fulfill such party's disclosure obligations imposed by law,
including, without limitation, federal securities laws.
6.7 Employee Matters. TBA shall have no obligation to continue
employing any employee of Concert Services for any length of time or at any
level of pay for any length of time after the Closing, except as set forth in
binding agreements of employment. TBA shall have no obligation to extend COBRA
coverage or any other employment benefit to any person who was an employee of
Concert Services immediately prior to the Closing but who does not continue as
an employee of Concert Services immediately after the Closing. Edward James
Dougherty and Janet L. Dougherty shall cease their employment relationship with
Concert Services effective as of the Closing.
6.8 Tax Matters. From and after the Closing, TBA, on the one hand, and
the Shareholders, on the other hand, shall cooperate fully with each other and
make available or cause to be made available to each other for consultation,
inspection and copying (at such other party's expense) in a timely fashion such
personnel, tax data, tax returns and filings, files, books, records, documents,
financial, technical and operating data, computer records and other information
as may be reasonably required (1) for the preparation by either of them of any
Tax Returns, elections, consents or certificates required to be prepared and
filed by such parties or (2) in connection with any audit or proceeding relating
to taxes relating to the assets of Concert Services. TBA agrees to retain all
books and records with respect to tax matters pertinent to Concert Services
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations of the respective taxable periods, and
to abide by all record retention agreements entered into with any taxing
authority. None of the parties hereto shall cause an election to be made, an
accounting for tax purposes to be adopted, or a position to be taken on any tax
return, or in any tax proceeding, that is inconsistent with the provisions of
this Agreement. In addition, as custodian of the books and records of Concert
Services as of the Closing Date, TBA, or its authorized representatives, shall
be responsible for closing such books and records as of the Closing Date for
state and federal income tax and financial reporting purposes. TBA and the
Shareholders shall cooperate fully with each other in connection with such
closing and TBA shall make available to the Shareholders all financial and
income tax data, statements, reports and information relating to such closing of
the books and records as of the Closing Date.
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6.9 Referral Commissions. TBA shall negotiate in good faith the
referral commissions to be paid Concert Services for Concert Services' business
referrals to the other operating divisions of TBA on all material projects,
consistent with the referral commissions paid other operating divisions of TBA
for referrals made to the other operating divisions of TBA or as otherwise
mutually agreed upon by Concert Services and TBA.
6.10 Noncompetition Covenant. Each Shareholder shall not, for the
period ending two (2) years from the Closing Date, directly or indirectly, as a
director, officer, agent, employer, employee, principal, proprietor, partner,
consultant or independent contractor, or in any other individual or
representative capacity, (i) invest (other than investments in publicly-owned
companies which constitute not more than five percent (5%) of the outstanding
securities of any such company) or engage in any business or activity that is
directly competitive with the business of Concert Services in the same
geographic areas in which Concert Services primarily operates, or (ii) accept
employment with or render services to a competitor of the business of Concert
Services. Edward James Dougherty shall be entitled to continue the management of
Amy Clawson and to retain the fees derived therefrom.
6.11 Covenant Not to Hire. For the period ending two years from the
Closing Date, no Shareholder, on his, her or its own behalf or on behalf of any
other person, partnership, association, corporation or other entity, shall hire
or solicit for employment any employee of Concert Services, or in any manner
attempt to influence or induce any employee of Concert Services to leave the
employment of Concert Services, nor shall a Shareholder use or disclose to any
person, partnership, association, corporation or other entity any information
concerning the names and addresses of Concert Services employees.
6.12 BandMerchandise.com. John F. Dougherty agrees to sell one hundred
percent (100%) of his equity interest in BandMerchandise.com to a non-affiliated
third party on or before April 1, 2001. Should John F. Dougherty fail to
transfer such interest by April 1, 2001, in consideration of the portion of the
Purchase Price payable to Mr. Dougherty pursuant to Section 1.2 of this
Agreement and the consideration received by Mr. Dougherty pursuant to the
Employment Agreement (as defined in Section 7.2(f)(vii) hereof), Mr. Dougherty
shall, commencing May 1, 2001, and continuing on the first day of each
successive month thereafter, assign and transfer to TBA ten percent (10%) of the
equity interest in BandMerchandise.com owned by him on May 1, 2001, free and
clear of all Liens, until he either sells his entire remaining equity interest
or conveys all of such equity interest to TBA.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Effect the Closing. The
respective obligations of each party to effect the Closing shall be subject to
the fulfillment at or prior to the Closing Date of the following condition: no
order shall have been entered and remain in effect in any action or proceeding
before any foreign, federal or state court or governmental agency or other
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foreign, federal or state regulatory or administrative agency or commission that
would prevent or make illegal the consummation of the transactions contemplated
hereby.
7.2 Additional Conditions to TBA's Obligations. The obligations of TBA
to effect the Closing are subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by
Concert Services or the Shareholders, the representations and
warranties set forth in Articles 3 and 4 of this Agreement (without
regard to any amendments or modifications of the Disclosure Schedule by
Concert Services after the time TBA has signed this Agreement) will be
true and correct as of the date hereof and at and as of the Closing
Date, as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such
representations and warranties and with appropriate modifications of
tense with respect to representations and warranties made as of a
specified date;
(b) Concert Services shall have performed, in all material
respects, each obligation and agreement and complied, in all material
respects, with each covenant to be performed and complied with by it
under this Agreement prior to the Closing Date, including, without
limitation, all of its agreements contained in Article 6 of this
Agreement;
(c) Except as otherwise disclosed on the Disclosure Schedule,
all consents by governmental or regulatory agencies or otherwise that
are required for the consummation of the transactions contemplated
hereby or that are required for TBA to own, operate or control Concert
Services or any portion of the assets of Concert Services or to prevent
a breach of or a default under or a termination of any agreement
material to Concert Services to which Concert Services is a party or to
which any material portion of the assets of Concert Services is
subject, will have been obtained;
(d) No action or proceeding before any court or governmental
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded or which might
adversely affect the right of TBA to own, operate or control Concert
Services or any material portion of the assets of Concert Services or
the value of the assets of Concert Services;
(e) On or prior to the Closing Date, except as consented to by
TBA, each Shareholder shall have terminated any employment,
compensation, consulting, fee, services or other similar agreements
with Concert Services payable to him or her, or to his or her
affiliated entities, if any;
(f) At the Closing, Concert Services will have delivered to
TBA the following:
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(i) a certificate executed on behalf of Concert
Services by its President stating that the conditions set
forth in Sections 7.2(a) through 7.2(d) of this Agreement have
been satisfied;
(ii) certified copies of the resolutions duly adopted
by Concert Services' Board of Directors authorizing the
execution, delivery and performance of this Agreement and the
other agreements contemplated hereby and thereby;
(iii) good standing or comparable certificates for
Concert Services from the jurisdiction of its incorporation
and from every jurisdiction where a failure to be qualified or
licensed would have a material adverse effect on the
consolidated financial condition, results of operations or
business of Concert Services, dated not earlier than ten (10)
days prior to the Closing Date;
(iv) copies of all third party and governmental
consents (or other evidence satisfactory to TBA) that Concert
Services is required to obtain in order to effect the
transactions contemplated by this Agreement;
(v) a copy of Concert Services' charter certified by
the Secretary of State of the State of Oregon;
(vi) certificates evidencing the Shares, duly
endorsed;
(vii) an Employment Agreement (the "Employment
Agreement"), between Concert Services and John F. Dougherty,
in substantially the form of Exhibit B attached hereto;
(viii) a Consulting Agreement (the "Consulting
Agreement"), between Concert Services and Entertainment
Consultants, LLC, in substantially the form of Exhibit C
attached hereto;
(ix) an Agent Services Agreement (the "Agent Services
Agreement") between Janet L. Dougherty and Concert Services,
in substantially the form of Exhibit D attached hereto; and
(x) such other documents as TBA may reasonably
request in connection with the transactions contemplated
hereby.
(g) All proceedings to be taken by Concert Services in
connection with the consummation of the Acquisition at the Closing and
the other transactions contemplated hereby and all documents required
to be delivered by Concert Services in connection with the Acquisition
and the other transactions contemplated hereby will be reasonably
satisfactory in form and substance to TBA.
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7.3 Additional Conditions to the Obligations of Concert Services and
the Shareholders. The obligations of Concert Services and the Shareholders to
effect the Closing are subject to the satisfaction of the following conditions
on or before the Closing Date;
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by TBA,
the representations and warranties set forth in Article 2 of this
Agreement will be true and correct as of the date hereof and at and as
of the Closing Date, as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such
representations and warranties and with appropriate modifications of
tense with respect to representations and warranties made as of a
specified date;
(b) TBA shall have performed, in all material respects, each
obligation and agreement and complied, in all material respects, with
each covenant required to be performed and complied with by it under
this Agreement prior to the Closing Date;
(c) No action or proceeding before any court or government
body will be pending or threatened wherein a judgment, decree or order
would prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(d) At the Closing, TBA will have delivered to Concert
Services and the Shareholders the following:
(i) a certificate executed on behalf of TBA by its
Chief Executive Officer stating that the conditions set forth
in Sections 7.3(a) through (c) of this Agreement have been
satisfied;
(ii) certified copies of the resolutions duly adopted
by TBA's board of directors authorizing the execution,
delivery and performance of this Agreement;
(iii) good standing certificates for TBA from the
Secretary of State of the State of Delaware dated not earlier
than ten (10) days prior to the Closing Date;
(iv) copies of all third party and governmental or
regulatory consents (or other evidence satisfactory to Concert
Services) that TBA are required to obtain in order to effect
the transactions contemplated by this Agreement;
(v) copies of TBA's charter certified by the
Secretary of State of the State of Delaware;
(vi) the Cash Portion and the Adjustable Notes; and
(vii) such other documents as Concert Services or the
Shareholders may reasonably request in connection with the
transactions contemplated hereby;
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(e) All proceedings to be taken by TBA in connection with the
consummation of the Acquisition at the Closing and all documents
required to be delivered by TBA in connection with the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Concert Services and the Shareholders;
(f) Except as otherwise disclosed to Concert Services and the
Shareholders, all consents by governmental or regulatory agencies or
otherwise that are required for the consummation of the transactions
contemplated hereby or that are required for TBA to own, operate or
control Concert Services or any portion of the assets of Concert
Services or to prevent a breach of or a default under or a termination
of any agreement material to Concert Services to which Concert Services
is a party or to which any material portion of the assets of Concert
Services is subject, will have been obtained; and
(g) The Employment Agreement, the Consulting Agreement and the
Agent Services Agreement will each have been executed and delivered as
of the Closing Date.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the unanimous written consent of the Shareholders and
the Boards of Directors of TBA and Concert Services;
(b) by either TBA or Concert Services if the Acquisition shall
not have been consummated by March 31, 2000;
(c) by TBA if there has been a misrepresentation or breach of
a representation or warranty or a failure to perform a covenant on the
part of Concert Services or the Shareholders with respect to their
representations, warranties and covenants set forth in this Agreement
and any such breach or failure constitutes a Material Adverse Breach;
and
(d) by Concert Services if there has been a misrepresentation
or a breach of a representation or warranty or a failure to perform a
covenant on the part of TBA with respect to their representations,
warranties and covenants set forth in this Agreement and any such
breach or failure constitutes a Material Adverse Breach.
8.2 Amendment. This Agreement may not be amended except by an
instrument signed by each of the parties hereto.
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8.3 Waiver. At any time prior to the Closing Date, (a) TBA may (i)
extend the time for the performance of any of the obligations or other acts of
Concert Services and/or the Shareholders or (ii) waive compliance with any of
the agreements of Concert Services and/or the Shareholders or with any
conditions to its own obligations, and (b) Concert Services and/or the
Shareholders may (i) extend the time for the performance of any of the
obligations or other acts of TBA or (ii) waive compliance with any of the
agreements of TBA or with any conditions to their own obligations in each case
only to the extent such obligations, agreements and conditions are intended for
their benefit.
8.4 Effect of Termination. If this Agreement is terminated as provided
in Section 8.1, this Agreement shall become void and there shall be no liability
or further obligation on the part of any party hereto or any of their respective
shareholders, officers or directors, except that nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement and the provisions of Section 6.6 and any confidentiality
agreements by and between TBA and Concert Services will survive such
termination.
ARTICLE 9
INDEMNIFICATION
9.1 By TBA, Concert Services and the Shareholders. TBA on the one hand
and Concert Services and the Shareholders (severally based upon the ratio in
which they own the Shares immediately prior to the Closing) on the other hand
each hereby agree to indemnify and hold harmless the other against all claims,
damages, losses, liabilities, costs and expenses (including, without limitation,
settlement costs and any legal, accounting or other expenses for defending any
actions or threatened actions) (collectively "Damages") reasonably incurred by
TBA, Concert Services and the Shareholders in connection with each and all of
the matters set forth below to the extent they constitute a Material Adverse
Breach.
(a) Any breach by the Indemnifying Party (as defined below) of
any representation or warranty made by such Indemnifying Party in this
Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Indemnifying Party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the Indemnifying Party pursuant to
this Agreement or in connection with the transactions contemplated by
this Agreement.
9.2 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when
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known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld, unless suit shall have been
instituted against it and the Indemnifying Party shall not have taken control of
such suit after notification thereof as provided in Section 9.3 of this
Agreement in which case the Indemnified Party may settle or compromise such
claim without the prior consent of the Indemnifying Party. If the Indemnified
Party fails to give prompt notice of any claim and such failure prejudices the
Indemnifying Party's position or its ability to defend the claim, the
Indemnifying Party's liability to the Indemnified Party shall be reduced by the
amount, if any, demonstrated to be directly attributable to the failure to give
such notice in a timely manner.
9.3 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.4 Payment of Indemnification Obligation. All indemnification by TBA,
Concert Services or the Shareholders hereunder shall be effected by payment by
wire transfer or delivery of a cashier's or certified check in the amount of the
indemnification liability.
ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations
and warranties set forth in this Agreement shall survive the Closing for a
period of one (1) year. Notwithstanding the
-29-
<PAGE> 34
above, claims resulting from any breach of any representation or warranty
concerning tax or Concert Services Employee Benefit Plan matters shall expire
one hundred twenty (120) days after the expiration of any applicable statute of
limitations. Any litigation arising out of or attributable to a breach of any
representation, warranty or covenant contained herein must be commenced within
the applicable period described above. If not commenced within the applicable
period, any such claim will thereafter conclusively be deemed to be waived
regardless of when such claim is or should have been discovered.
10.2 Effect of Due Diligence. No investigation by TBA or Concert
Services into the business, operations and condition of the other shall diminish
in any way the effect of any representations or warranties made by either party
in this Agreement or shall relieve such party of any of its obligations under
this Agreement.
10.3 Specific Performance. TBA, Concert Services and the Shareholders
understand and agree that the covenants and undertakings on each of their parts
herein contained are uniquely related to the desire of TBA, Concert Services and
the Shareholders to consummate the Acquisition, that the Acquisition is a unique
business opportunity for Concert Services, TBA, and the Shareholders and that,
although monetary damages may be available for the breach of such covenants and
undertakings, monetary damages would be an inadequate remedy therefor.
Accordingly, Concert Services, TBA and the Shareholders agree that TBA shall be
entitled to obtain specific performance by Concert Services and the Shareholders
of every such covenant and undertaking contained herein to be performed by
Concert Services and the Shareholders and that Concert Services and the
Shareholders shall be entitled to obtain specific performance from TBA of each
and every covenant and undertaking herein contained to be observed or performed
by TBA.
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by telex, telecopy, facsimile or overnight courier, or mailed by registered
or certified mail (postage prepaid and return receipt requested), to the party
to whom the same is so delivered, sent or mailed at the following addresses (or
at such other address for a party as shall be specified by like notice):
if to TBA:
TBA Entertainment Corporation
402 Heritage Plantation Way
Hickory Valley, Tennessee 38042
Attention: Thomas Jackson Weaver III
Telecopy: (901) 764-6107
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<PAGE> 35
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attention: Randall E. Roberts, Esq.
Telecopy: (214) 745-5390
if to Concert Services:
EJD Concert Services, Inc.
5576 Canfield Pl. N., Suite 100
Seattle, Washington 98103
Attention: John F. Dougherty
Telecopy: (206) 545-9465
with a copy to:
Con P. Lynch
P.O. Box 741
Salem, Oregon 97308
Telecopy: (503) 371-2959
(c) if to Shareholders:
Edward J. Dougherty
530 Washington Street South
Salem, Oregon 97302
Telecopy: ________________
Janet L. Dougherty
530 Washington Street South
Salem, Oregon 97302
Telecopy: ________________
John F. Dougherty
5576 Canfield Pl. N., Suite 100
Seattle, Washington 98103
Telecopy: (206) 545-9465
Eva Dougherty
5576 Canfield Pl. N., Suite 100
Seattle, Washington 98103
Telecopy: (206) 545-9465
-31-
<PAGE> 36
The Ed and Jan Dougherty Charitable Remainder Trust
530 Washington Street South
Salem, Oregon 97302
Telecopy: _________________
with a copy to:
Con P. Lynch
P.O. Box 741
Salem, Oregon 97308
Telecopy: (503) 371-2959
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
10.5 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
10.6 Severability. If any term, provision, covenant or Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated and the parties shall negotiate in good faith to modify
the Agreement to preserve each party's anticipated benefits under the Agreement.
10.7 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) except for any confidentiality
agreements executed in connection with the transactions contemplated hereby,
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof; (b) except as expressly set forth herein, is not intended
to confer upon any other person any rights or remedies hereunder; (c) shall not
be assigned by operation of law or otherwise, except that TBA may assign all or
any portion of their rights under this Agreement to any wholly owned subsidiary
but no such assignment shall relieve TBA of its obligations hereunder, and
except that this Agreement may be assigned by operation of law to any
corporation with or into which TBA may be merged; and (d) shall be governed in
all respects, including validity, interpretation and effect, by the internal
laws of the State of Oregon, without giving effect to the principles of conflict
of laws thereof. Courts within the State of Oregon will have jurisdiction over
any and all disputes between the parties hereto, whether in law or equity,
arising out of or relating to this Agreement. The parties consent to and agree
to submit to the jurisdiction of such courts. This Agreement may be executed in
two or more counterparts which together shall constitute a single agreement.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually results in damages
to the other party in excess of $20,000
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<PAGE> 37
or (b) in the aggregate result in damages to the other party in excess of
$50,000, shall constitute, for purposes of this Agreement, a "Material Adverse
Breach."
10.9 Limitation of Liability. Neither TBA, Concert Services, nor the
Shareholders shall have any liability for breach of the representations,
warranties and covenants made by them and contained in this Agreement unless
such breach is a Material Adverse Breach. IN ADDITION, EXCEPT IN CASES OF FRAUD,
THE AGGREGATE, MAXIMUM LIABILITY UNDER ARTICLE 9 HEREOF OF EACH OF (i) THE
SHAREHOLDERS COLLECTIVELY, AND (ii) TBA, SHALL BE AN AMOUNT EQUAL TO THE
PURCHASE PRICE PAID PURSUANT TO SECTION 1.2 HEREOF.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE> 38
STOCK PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, the Shareholders and Concert Services have
caused this Agreement to be executed on the date first written above by their
respective officers duly authorized.
TBA ENTERTAINMENT CORPORATION
By: /s/ Thomas Jackson Weaver III
-------------------------------
Thomas Jackson Weaver III,
Chief Executive Officer
EJD CONCERT SERVICES, INC.
By: /s/ Edward James Dougherty
-------------------------------
Edward James Dougherty, President
/s/ Edward James Dougherty
-----------------------------------
EDWARD JAMES DOUGHERTY
/s/ Janet L. Dougherty
-----------------------------------
JANET L. DOUGHERTY
/s/ John F. Dougherty
-----------------------------------
JOHN F. DOUGHERTY
/s/ Eva Dougherty
-----------------------------------
EVA DOUGHERTY
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<PAGE> 39
THE ED AND JAN DOUGHERTY CHARITABLE
REMAINDER TRUST
By: /s/ Edward J. Dougherty
------------------------------------
Edward J. Dougherty, Co-Trustee
By: /s/ Janet L. Dougherty
------------------------------------
Janet L. Dougherty, Co-Trustee
-35-
<PAGE> 40
SCHEDULE 1.2
PURCHASE PRICE CONSIDERATION
<TABLE>
<CAPTION>
Name Cash Portion Note Amount
---- ------------ -----------
<S> <C> <C>
John F. Dougherty $216,000 $24,000
and Eva Dougherty,
Joint Tenants
Edward James Dougherty $162,000 $18,000
and Janet L. Dougherty,
Joint Tenants
The Ed and Jan Dougherty $162,000 $18,000
Charitable Remainder ______________ ______________
Trust
TOTAL $540,000 $60,000
</TABLE>
<PAGE> 41
SCHEDULE 2
DISCLOSURE SCHEDULE
<PAGE> 42
ANNEX I
OWNERSHIP OF SHARES
<TABLE>
<CAPTION>
Number of Shares of Concert Services
Shareholder Name Common Stock
---------------- ------------
<S> <C>
John F. and Eva Dougherty, Joint Tenants 4
Edward J. and Janet L. Dougherty, Joint 3
Tenants
The Ed and Jan Dougherty Charitable 3
Remainder Trust
</TABLE>
<PAGE> 43
EXHIBIT A
FORM OF ADJUSTABLE PROMISSORY NOTE
<PAGE> 44
EXHIBIT B
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 45
EXHIBIT C
FORM OF CONSULTING AGREEMENT
<PAGE> 46
EXHIBIT D
FORM OF AGENT SERVICES AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMAMRY FINANCIAL INFORMATION EXTRACTED FROM TBA
ENTERTAINMENT CORP. FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,382,800
<SECURITIES> 0
<RECEIVABLES> 4,112,500
<ALLOWANCES> 87,900
<INVENTORY> 640,500
<CURRENT-ASSETS> 19,307,000
<PP&E> 4,663,700
<DEPRECIATION> 1,552,700
<TOTAL-ASSETS> 48,993,700
<CURRENT-LIABILITIES> 14,102,300
<BONDS> 0
0
100
<COMMON> 8,900
<OTHER-SE> 28,487,200
<TOTAL-LIABILITY-AND-EQUITY> 48,993,700
<SALES> 0
<TOTAL-REVENUES> 20,302,000
<CGS> 0
<TOTAL-COSTS> 13,951,1000
<OTHER-EXPENSES> 6,020,100
<LOSS-PROVISION> 6,900
<INTEREST-EXPENSE> 177,300
<INCOME-PRETAX> 270,900
<INCOME-TAX> 127,000
<INCOME-CONTINUING> 143,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,900
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
